Pricing and Hedging of Discrete Dynamic Guaranteed Funds

We derive a risk‐neutral pricing model for discrete dynamic guaranteed funds with geometric Gaussian underlying security price process. We propose a dynamic hedging strategy by adding a gamma factor to the conventional delta. Simulation results demonstrate that, when hedging discretely, the risk‐neutral gamma‐adjusted‐delta strategy outperforms the dynamic delta hedging strategy by reducing the expected hedging error, lowering the hedging error variability, and improving the self‐financing possibility. The discrete dynamic delta‐only hedging not only causes potential overcharge to clients but also could be costly to the issuers. We show that a naive application of continuous‐time hedging formula to a discrete‐time hedging setting tends to worsen these possibilities.     

Pricing Discrete Dynamic Fund Protections

Abstract

The authors investigate the pricing of discretely monitored dynamic fund protections when the fund price follows a lognormal process or a constant elasticity of variance (CEV) process. A backward recursive pricing formula is derived. By employing a numerical technique that combines function approximation and numerical quadrature, the authors demonstrate how to complete each recursion level efficiently. Numerical experiments show that the results compare favorably with those obtained by other pricing methods.     

A research and development decision model for pharmaceutical industry: case of China

This paper evaluates prospective technology areas, development strategies, and various innovation resources in China's pharmaceutical sector through the use of a hierarchical decision model. The results indicate that although domestic SMEs are the major preferred innovation alternative, it is followed closely by foreign MNCs. The sensitivity analysis indicates that the effectiveness of policy decisions are influenced by certain high technology areas. Recombinant therapeutic proteins, recombinant vaccines, and monoclonal antibody technologies are identified as the major areas that will influence the priority of innovation resources. The research crafts a research framework to formulate innovation strategies in dealing with the uncertainties of technology development and policy decisions in the biopharmaceutical industry.     

Food and the Perception of Eating: The Case of Young Taiwanese Consumers

This study explores the food perception of young Taiwanese consumers, a growing market segment in the restaurant industry. An innovative qualitative tool known as the Zaltman Metaphor Elicitation Technique (ZMET) was employed to elicit deeper thoughts and emotions of young consumers. Twelve Taiwanese from Generation Y were invited to participate in a ZMET interview where they expressed their perceptions concerning food and eating through self-collected images. The data were analyzed using constant comparative method and charted on a consensus map. Five themes have evolved from the consensus map: health, trying new food, sharing, enhancing knowledge, and happiness. Findings reveal that young Taiwanese consumers are health-conscious and have high acceptance of novel food. They perceive food as a means of enjoyment and fostering social relationships. This study has contributed additional perspectives to existing literature by revealing the function of food in enhancing knowledge, as well as unveiling the deep-seated meanings of food associated with consumer's personal relevance values. Marketing implications for the restaurant industry targeting young Taiwanese consumers are proposed.     

Factors influencing strategic alliance outcomes in a manufacturing supply chain: Role of alliance motives,interdependence, asset specificity and relational capital

Integration of various theories is essential to completely understand and explain strategic alliances in a supply chain. The purpose of this paper is to develop a framework by integrating the features of transaction cost theory, resource-based theory, contingency theory, social exchange theory, and Kelley's personal relationship theory and test the framework through empirical research. The present study addresses the impact of strategic alliance motives, environment, asset specificity, perception of opportunistic behavior, interdependence between supply chain partners, and relational capital on strategic alliance outcomes. Besides, the study has also tested the role of relational capital as a central mediating construct. A sample of 2156 companies representing different industries in manufacturing in Malaysia was selected for the distribution of questionnaire. We tested the structural model using structural equation modeling (SEM). Based on the results, we conclude the following significant relationships: (1) strategic alliance motives and perception of opportunistic behavior on interdependence and relational capital, (2) interdependence on relational capital, (3) environment on strategic alliance motives, (4) relational capital on strategic alliance outcomes, and (4) the mediating role of relational capital. The current study adds significantly to the body of knowledge on strategic alliances and can help managers identify factors that influence the success of strategic alliances and provide a proper direction to develop robust and effective collaborative relationships between supply chain partners.     

Multilateral Bargaining Problems

In many situations in economics and political science there are gains from forming coalitions but conflict over which coalition to form and how to distribute the gains. This paper presents an approach to suchmultilateral bargaining problems. Asolutionto a multilateral bargaining problem specifies an agreement for each coalition that is consistent with the bargaining process in every coalition. We establish the existence of such solutions, show that they are determined by reservation prices, and characterize these reservation prices as the payoffs ofsubgame perfect equilibrium outcomesof a non-cooperative bargaining model.Journal of Economic LiteratureClassification Numbers: C71, C72, C78.     

Impact of public involvement in research on quality of life and society: a case study of research career trajectories

This case study illustrates the research career trajectory of two lay researchers after they joined a Big Lottery funded study to explore loneliness and isolation among older people living in a town in the north of England, UK. The two lay researchers were of pensionable age themselves and engaged in all aspects of the research process as full members of the research team. Following research methods training and their substantive input into study design, they engaged fully in an approach of peer‐interviewing of other older adults as the main study method. Following this initial exposure to undertaking research, these exemplars of public involvement in research went on to be involved in other research as co‐researchers at a local and national level. Initially the paper sets out the lay researchers' personal backgrounds and expectations from involvement in research. The impact of their involvement in research on their quality of life and that of their community is presented. Latterly, the societal impact of the lay researcher's involvement is examined. The difference they made to the initial study design and conduct is described first followed by their development as substantial research resources for other studies and community initiatives. Overall the impact of these lay researchers has been significant and the paper provides an example of how involvement in research can impact on individuals and communities to great effect.     

2018 WTO Trade Policy Review of Malaysia

This paper presents an academic analysis and review of the recently completed WTO Trade Policy Review (TPR) of Malaysia, 2018. This includes suggesting policies that can help to promote Malaysia's international competitiveness. We show that the sharp decline in commodity prices that started in 2014 contributed in narrowing Malaysia's trade balance and current account balance as a share of GDP. The faster decline of exports as a share of GDP compared to imports accounted for most of the substantial reduction. Further, the collapse of commodity prices was accompanied by a sharp depreciation of Ringgit Malaysia. We also show that Malaysia is losing international attractiveness in terms of FDI inflows relative to its economic size. This is evidenced by the downward trend in Malaysia's FDI performance index since 1992. Further, international tourism has fallen on average since 2014, due largely to a drop in tourist arrivals from Singapore. Policymakers should introduce policies to enhance international competitiveness, such as reforming the education system to produce skilled workers and reducing reliance on low‐skilled foreign workers.     

The Effects of Superstition on Choice and Latency

This study investigates the effects of superstition characteristics on choice and latency. Three dimensions of superstition are investigated—valence, accessibility, and relevance. Exposure to negative, accessible, or relevant superstition resulted in faster choices made. Superstitions that were negative or relevant led to choices favoring the auspicious product than superstitions that were positive or irrelevant. The auspicious product was also more likely to be chosen if it were associated with a superstition that was more accessible than less accessible. Findings also suggested that when superstition was relevant, the effects of a negative superstition were amplified than when superstition was irrelevant. Relevancy had less effect on positive superstition.     

Impact of Trade Liberalisation on a Multi-Region Economy within an Inter-Regional Game Theoretic Framework

The aim of this paper is to analyse the general equilibrium effects of tariff changes in a multi-regional model that has inter-government strategic interactions, where central and regional governments react to policies of one another by implementing counter strategies to maximise their own welfare. The motivation for this paper arises from observing inter-provincial and provincial-central government competitive money creation behaviour in China and in the former Soviet Union. By engaging in competitive money creation, governments are able to cushion the impact of tariff changes on national and regional absorption. However, it is also shown that as the marginal rate of substitution of absorption for inflation increases, the impacts of tariff changes with and without competitive money creation tend to converge.